"Oracle has inked multibillion-dollar deals to develop data centers to power artificial intelligence work for customers like OpenAI, Meta Platforms Inc. and Elon Musk's xAI. Last month, the company said the cloud infrastructure business would produce $144 billion in sales by fiscal 2030. On Thursday, Oracle said overall annual revenue would total $225 billion by then. The main question is how quickly Oracle can supply the data centers needed to capitalize on all this demand, wrote Brad Sills, an analyst at Bank of America. This is due to "supply constraints across land, buildings, energy and GPUs," he wrote."
"An infrastructure project for AI that generates $60 billion in total revenue over six years, for example, would have a gross margin of 35%, the company said during a presentation. Gross margin represents the percentage of revenue remaining after the cost of producing goods and services. The margin profile on this example is "illustrative of even the very largest customers," co-Chief Executive Officer Clay Magouyrk said while speaking with analysts."
Oracle projected $225 billion in annual revenue by fiscal 2030 and $144 billion from its cloud infrastructure business. The company has signed multibillion-dollar deals to build data centers for AI customers including OpenAI, Meta and xAI. Analysts identified supply constraints across land, buildings, energy and GPUs as a key risk to meeting demand. Shares fell as much as 8.2% intraday after the outlook, following an 88% year-to-date gain. Oracle presented an illustrative AI infrastructure project with $60 billion revenue over six years and a 35% gross margin to address profitability concerns.
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